American Financial Group Lines up Its Bench for Post-Lindner World
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June 28, 2013 American Financial Group lines up its bench for post-Lindner world Steve Watkins Staff Reporter- Cincinnati Business Courier Email | Twitter | Google+ | LinkedIn Carl Lindner Jr.’s boys aren’t boys anymore. Carl Lindner III and Craig Lindner are co-CEOs of American Financial Group, and the city’s highest-paid chief executives (for full list of highest-paid CEOs and analysis, see page 16), yet to many Cincinnatians the sons of the late financier and philanthropist will always be Carl’s kids. But Carl III will be 60 in August. Craig turns 59 next March. And while their father, who through the years controlled Chiquita Brands, Provident Bank, the Cincinnati Reds and – most importantly – AFG, ran businesses well into his 80s, both are nearing the age when many public company CEOs retire. Procter & Gamble CEO A.G. Lafley was 62 when he retired – the first time – in 2010. Cincinnati Bell’s Jack Cassidy retired earlier this year at 58. With promotions and new hires, the Lindners are lining up the next generation of company leaders. Senior executives Jeff Consolino, John Berding and Shelly Gillis are all 50 or under. Leaders of the insurance businesses might also get consideration, including 53-year-old Mark Muething. Down the road, a Lindner son and son-in-law could also be in the succession picture. When the Lindners do retire from AFG, it will mark the biggest transition in the history of one of Cincinnati’s largest and most important companies. The choice of successor could impact local jobs and charitable giving. Even the names on the city’s baseball stadium and tallest skyscraper are at stake. AFG’s long Lindner legacy The Lindners have run AFG since Carl Jr., who was chairman until he died in 2011 at age 92, started it in 1959 as a small insurance and investment company. It’s since grown into a Fortune 500 giant, with 6,000 employees, $5 billion in annual revenue and holdings in hotels, office buildings and resorts across the country. But that could change. There’s no next generation of Lindner offspring that are obvious successors, like Carl III and Craig were when their father retired. To be sure, they say they aren’t going anywhere. “Certainly neither of us has any intention to retire anytime soon,” Craig told the Business Courier after the company’s May 22 annual meeting. “We love what we’re doing.” Carl III chuckled when asked if he or Craig were ready to retire to the family compound in Key Largo, Fla. “No, we’re not ready to do that,” he said. Bill Bahl, chairman and co-founder of Cincinnati investment advisory firm Bahl & Gaynor, served with Craig on the board at Cincinnati Country Day School. “Sixty is the new 40,” said Bahl, who is 61. “If they follow their father’s example, they’ll work well beyond their 70s into their 80s, because of their lifelong involvement with the business and their love of the business. I would be very surprised if they retired in their 60s.” But the Lindner sons don’t plan to match their father’s tenure. “(Carl Jr.) worked well into his 80s,” Carl Lindner III said. “We’re not ready to say we’ll do that.” Like their father, they seem to be living the life they want, as they work. Carl is an avid golfer and has a home within an easy iron shot of the 18th green at Pebble Beach in California. He and Craig are both heavily involved in Cincinnati, playing key roles in starting a church, school and mental health facility. Big shoes to fill It remains to be seen how difficult it will be to replace the Lindners when they do decide to retire from AFG. But it’s clear it will likely be impossible to find someone with their level of commitment to Cincinnati – or their business acumen. Carl III became AFG’s president at 38 and ran its property and casualty insurance unit before that. Craig headed up the annuities and investment management businesses in his early 30s. “They’re top, top flight,” said John Barrett, CEO of one of Cincinnati’s largest companies, insurer Western & Southern Financial Group. As to the pair’s Cincinnati involvement and commitment, Barrett said “they’re deeply religious and family-oriented. The work they do in charity is very deep. We’re so fortunate they call Cincinnati home.” Barrett considered Carl Jr. one of his closest friends. They would speak for about an hour at least once a week. Barrett never did business with the Lindner family, however, until he negotiated the deal for AFG to take 60 percent of the space in Western & Southern’s Queen City Square project. It built that skyscraper, the city’s tallest, in 2011, but not before it had a deal with its largest tenant. And it’s Great American Insurance’s name at the top. “I made that deal with (Carl III) and Craig,” Barrett said of the sons he’s known for 26 years. “Not once did their dad bring it up. He respected them enough and I respected them enough not to bring it up. That was Carl’s and Craig’s commitment to the city. When the economy would have taken them out near Kings Island, they showed their commitment to the city.” Barrett expects them to run it for quite some time. “They’re committed to it,” he said. “They take it exceptionally seriously. Those guys run a very good business.” Planning for the next CEO Grooming a successor, however, is a process that has certainly already started at AFG. It’s a multiyear process, after all. (see boxes, below) The brothers could set up one of the future leaders early in the process so that executive can gain experience and be ready when they turn over the reins. And AFG’s board also should be involved as soon as possible. “It’s the most important thing a board does,” said Denise Kuprionis, who advises firms on succession planning with her Cincinnati-based Governance Solutions Group. From his view, Barrett doesn’t expect that for another 10 to 15 years. That person could be a relative or an in-law, or it could be someone else. “If their children are hard working, I don’t see why not,” he said. “It’s a hell of a commitment. But if their kids are as good as they are, then you want them there.” Even if retirement is several years off, the Lindners are spending plenty of time right now developing their company’s future leaders. “One of the priorities is to have a number of strong people as potential successors,” Craig Lindner said, adding the company does have a succession plan in place. Amit Kumar, an analyst at Macquarie Securities in New York, said “the company has a good bench of candidates internally.” AFG has several obvious candidates. CFO Jeff Consolino and John Berding, president of the company’s investment management unit, would be among them, as would newly promoted senior vice president and chief administrative officer Shelly Gillis. “We continue to promote people as part of the succession planning process,” Carl Lindner III said during the meeting upon introducing Gillis. Lindner raised the topic at the annual meeting, perhaps not coincidentally just a week after the Courier asked the company about the succession plan and when the brothers plan to retire. There are no other Lindners among the highest-ranked executives. But two family members are rising through the ranks: Carl III has a son-in-law and Craig has a son at the firm. David Thompson Jr. and Craig Lindner Jr.">Craig Lindner Jr. could end up running the company at some point (see box for details on potential successors). “Over time if they have the capability, the talents and the desires, they have a shot at taking more responsibility as much as anybody else,” Carl III said. A solid succession plan is important to any public company. Look at P&G, which had to bring back Lafley last month when Bob McDonald announced his departure. One American Financial board member, who asked not to be identified, said the board is fully confident in the Lindners’ succession plan. That’s a key for any CEO, Bahl said. “I think the major role of the CEO is to groom their successor and have a strong bench in case any unforeseen circumstances arise,” he said. “You need a bench and a short list.” The Lindners appear to have both. Watkins covers banking and finance, insurance and sports businessJun 28, 2013, 6:00am EDT Thoughts on American Financial's critical CEO decision Denise Kuprionis advises companies on matters like CEO contingency plans through her Cincinnati-based Governance Solutions Group. Steve Watkins Finding and naming a new chief executive officer is maybe the most important job of a firm’s board of directors. “It’s one of the more important things you do as an executive," John Barrett, Western & Southern Financial Group CEO. said. Timing is vital “You start early, but you don’t make the call until late,” John Barrett said. “You can ruin guys’ careers by making them the heir apparent.” Some start to feel entitled. And in many cases, people start answering to the successor before the incumbent leaves. That creates a divide within the company. The time to start planning, Denise Kuprionis said, is “the day the new CEO starts.” Kuprionis advises companies on these matters through her Cincinnati-based Governance Solutions Group. Make several plans Boards should have at least two plans.